As institutional demand grows for cryptocurrencies, Genesis Global Trading is launching a digital currency lending business called Genesis Capital to enable investors to borrow bitcoin, ether and others for a fixed amount of time.
One of the uses will be for investors who want to bet against bitcoin without taking on a lot of risk.
"This will be the first time that institutional investors will get the opportunity to really borrow and hedge or short the digital currency spot market in size," Genesis Capital CEO Michael Moro told CNBC.
Moro added that typically it is quite challenging for institutional investors to borrow a sizable amount of bitcoin or another cryptocurrency to ultimately short. Under short selling, traders sell borrowed securities in hopes of buying them back later at a lower price before they have to return the securities back to the holder.
Demand for this product has already brought Genesis Capital some noteworthy clients in the cryptocurency world, including Andreessen Horowitz-backed digital currency hedge fund BlockTower Capital.
BlockTower is a client of Genesis both for OTC trading and crypto-asset borrowing. DV Chain, a cryptocurrency trading firm, is also a client.
Experts say the launch of the lending business is part of the broader buildout of the cryptocurrency ecosystem. As the futures market grows, analysts say, the desire to utilize trading strategies that allow you to hedge or find ways to arbitrage digital currencies increases.